The index, which had gained 328 points in the last two trading sessions, dropped by 405.24 points, or 2.30 percent to 17,196.47, after hitting the day's low of 17,136.50.

The NSE 50-issue index Nifty plunged 136.50 points, or 2.54 percent to 5,228.45 with stocks of realty, power and banking sectors suffering the most.

Brokers said the rupee's falling to more than two months low, breaching Rs 51 per US dollar level, triggered selling. They said a weakening trend in the European stock markets on fears that China’s manufacturing may contract further, also hit the market sentiment.